PARIS • French billionaire Bernard Arnault moved to consolidate control over Christian Dior for about €12.1 billion (S$18.3 billion), folding the fashion house's operations into the LVMH luxury empire in one of his biggest transactions.
The deal, which will unite ownership of one of the most iconic fashion brands under one roof for the first time in decades, values Christian Dior at €260 a share, according to a statement yesterday.
That is 15 per cent above the Monday closing price of Dior, which Mr Arnault's family already controls with a 74 per cent stake.
Under a series of planned transactions, LVMH will get Christian Dior Couture, which makes the Lady Dior handbag, made-to-measure gowns, and men's and women's ready-to-wear fashion apparel.
Mr Arnault's family also holds a 47 per cent stake in publicly traded LVMH, which already owns Dior perfumes and beauty products thanks to a 1960s-era deal to raise capital for the then-troubled fashion brand.
"Reuniting Christian Dior Couture and Christian Dior Parfums, so one brand (is) under one leadership, has to be a good thing for LVMH shareholders," Mr Stephen Mitchell, head of strategy for global equities at Jupiter Asset Management, said in a Bloomberg Radio interview. "It does clean up the corporate structure."
LVMH rose by as much as 3.2 per cent in early trading in Paris, while Dior was up as much as 13 per cent.
Dior investors can choose payment in cash or stock of Hermes International, using shares in the rival luxury company that the Arnault family received in 2014 after a controversial effort by LVMH to build a stake.
The boards of Christian Dior and LVMH are unanimously in favour of the deals, and have appointed independent experts to review their terms, according to the statement.
Swapping the Hermes stock for Dior shares helps the Arnault family cash out of a profitable investment without paying taxes on a sale.
"This is a good acquisition for LVMH in our view, given the strong brand of Christian Dior," analysts at Barclays said in a note, adding that it is "good use of its balance sheet".
Hermes was down as much as 4 per cent in early trading.
LVMH, whose full name is LVMH Moet Hennessy Louis Vuitton SE, is paying about 15.6 times earnings before interest, tax, depreciation and amortisation over the past year for Christian Dior Couture, which it will acquire for €6.5 billion under the second part of the plan.
GOOD FOR SHAREHOLDERS
Reuniting Christian Dior Couture and Christian Dior Parfums, so one brand (is) under one leadership, has to be a good thing for LVMH shareholders...
It does clean up the corporate structure.
MR STEPHEN MITCHELL, head of strategy for global equities at Jupiter Asset Management.
Designer Christian Dior founded the fashion house in 1946.